A growing personal finance debate centers around whether or not individuals should have a mortgage when they retire. A surprising number of retirees maintain a mortgage — 4 in 10 in 2007 — but is this good financial management?

US News says that most people are better off paying down the debt before they retire, but that the answer is not clear cut. As such, they recommend the following should be considered when making your final decision:

Compare returns. Some retirees keep their mortgages in hopes of achieving a higher rate of return elsewhere.

Weigh the tax breaks. The interest you pay on your home mortgage is tax deductible. But you only benefit from this tax perk if all of your itemized tax deductions add up to more than the standard deduction that most taxpayers receive automatically.

Preserve your retirement accounts. It can be tempting to dip into your retirement stash to pay off your mortgage. However, your tax bite could jump if you withdrew a large sum from your tax-deferred retirement accounts in a single year.

Consider refinancing. Refinancing from a variable-rate loan to a fixed-rate mortgage can help minimize mortgage payments in retirement.

Keep some savings. Although eliminating your mortgage is a worthy goal, high-interest debt such as credit cards and car loans should be paid off before a mortgage.

Like much of personal finance, the best decision on this subject will vary from person to person based on circumstances, goals, preferences, and so on. But in general, we’re of the opinion that a retiree should be mortgage-free before he leaves the work world.

What’s your take on the issue?

Should You Carry a Mortgage into Retirement? [US News]

— FREE MONEY FINANCE (Photo: Great Beyond)

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